Loans harder for first-time homebuyers
Vail, CO Colorado
The good news is the Vail Valley’s second-home-owner-driven real estate market seems mostly immune to the home price declines that are plaguing much of the country.
The bad news? Some local homebuyers may find it difficult to get the mortgage they want to buy that Vail Valley home ” if they can get a mortgage at all.
Local mortgage brokers have differing opinions about how significantly the so-called subprime-lending fall-out will affect Eagle County. The crisis was triggered by homeowners who borrowed home loans with less-than-stellar credit and now cannot afford to make their mortgage payments. Banks are losing money and laying off employees, and most have stopped lending to those with risky credit backgrounds.
That means prospective homebuyers with weak credit ” a history of late payments or no repayment on borrowed money ” are less likely to get a loan. But the turmoil is affecting some prospective homebuyers with average credit, too, said James Wine, president of the Vail Mortgage Group Corporation in Edwards.
That’s because mortgage lenders across the country are being forced to raise the qualifications for being approved for more desirable loans ” those with less restrictive terms and lower interest rates.
What was considered a decent credit score a few months ago may be too low today to get a mortgage with a desirable interest rate. Homebuyers with fluctuating incomes “restaurant workers and ski instructors, for example ” may have trouble getting home loans and those with no money to put down on a home purchase may be out of luck.
Options like 100-percent financing ” which is particularly popular with first-time homebuyers, especially around here ” is being limited to only borrowers with great credit scores and who can fully document their incomes, said Chris Neuswanger of Macro Financial Group in Avon.
Wine said 100-percent financing is all but gone.
Now, lenders are insisting that homebuyers put down 10 to 20 percent of the home’s purchase price before granting them a mortgage. Consider that the going price for a two-bedroom condominium in Edwards’ Brett Ranch is about $370,000. In Eagle Ranch, a two-bedroom condominium is about $350,000.
“In our market, that’s a lot of money,” Wine said. “I’ve been doing this for 15 years. A lot of people think we are exempt form this. We are not.”
Those who rely on tips for their income, or work multiple jobs throughout the year, may run into trouble, too. That’s because they have to use what’s called a “stated income” form because they cannot verify their income with documentation.
Lenders seem less willing to offer mortgages to residents who don’t have a steady salary, Neuswanger said.
Michelle Hayes of Hayes Mortgage Group, said there still are plenty of loan programs for those who use stated incomes to qualify for a mortgage. They’ll just need to come in with some cash to put down on a house.
It’s also getting harder to approve loans for more than $417,000 ” called jumbo loans, Neuswanger said. But for those looking to borrow less than that, buying a home could soon get a little easier. Interest rates for those home loans are beginning to drop, Hayes said. If the homebuyer has 20 percent to put down on a home, they could purchase a home worth $521,000 or less, she said.
“I’d advise consumers to look beyond the sound bite and the glaring headlines of gloom and doom,” Neuswanger said. “Really, the mortgage industry is functioning and we are closing loans everyday. We are making it work for most people.”
If the national housing and mortgage crisis is relatively short-lived, the Vail Valley should remain relatively unaffected, said Jimmy Brenner, owner of Blue Sky Mortgage and 35-year resident of Eagle County.
Close to 60 percent of all real estate sales purchased in the valley are bought with cash, Brenner said.
“That’s the No. 1 factor that adds a lot of stability here,” he said. “So many own their homes free and clear.”
The other 40 percent use loans to purchase their second homes. If real estate across the country continues to weaken, and if these second-home owners find they can’t afford both homes, they may get rid of the home they have in Vail, Brenner said.
Vail real estate, though, should stay relatively stable, he said.
“The values over the long term have continued to move up,” he said. “It’s a resort area … there’s limited real estate in unique places.”
Without a doubt, though, local workers who want to buy homes will be the most affected by what’s going on nationally, Brenner said.
“The (lending) guidelines are tightening as we speak,” he said.
Despite all that, Eagle County School District teacher Tommy Dodge said he was approved for a mortgage that was far larger than what he wants to borrow. On his salary, all he can afford is a deed-restricted condo at Miller Ranch.
But he’s not worried that tightening lending guidelines will hurt him, he said. He’s scrimped and pinched to save up money for a down payment and has “great credit,” he said.
“I’m not going to say it’s not affecting me,” he said. “The mortgage rates, they can affect you in a certain way. But I’ve been renting for 14 years and I want to buy. I’m sick of paying someone else’s mortgage.
Project Editor Tamara Miller can be reached at 748-2936, or firstname.lastname@example.org.